Deck 18: Accounting for Private Not-For-Profit Organizations

Question 1

A donation was received by a voluntary health and welfare organization specifically to care for indigent patients. Which of the following should be used to record the gift?

A) Unrestricted Net Assets
B) Public Support--Unrestricted Contribution
C) Public Support--Temporarily Restricted Contributions
D) Revenues--Unrestricted

Answer 1

C

Question 2

In a not-for-profit organization, depreciation on capital assets is recognized on all but which of the following?

A) contributed assets.
B) building.
C) equipment.
D) works of art intended for a display collection.

Answer 2

D

Question 3

A major corporation makes a donation of $10,000,000 to the local art museum foundation for the construction of a new art museum provided the community can match the $10,000,000 with other donations. This is an example of a(n):

A) Unconditional Pledge
B) Unrestricted Contribution
C) Conditional Pledge
D) Endowment

Answer 3

C

Question 4

Which of the following is NOT a required characteristic of a private not-for-profit organization per the definition given by the AICPA?

A) no owners or shareholders
B) an operating purpose other than making a profit
C) an organization dedicated to service of the public good
D) Significant contributions from providers who do not expect reciprocal goods or services in return

Question 5

Which of the following items are considered special event support for a voluntary health and welfare organization?

A) bingo games and bake sales
B) a donated painting
C) donated stock in a publicly traded company
D) bequest of a building

Question 6

Alice makes a cash gift which has no strings attached to a political party. It is recorded as:

A) An Endowment.
B) Revenue-Unrestricted contribution.
C) Revenue-Temporarily Restricted Contribution.
D) An increase in the fund balance of the General Fund.

Question 7

On the financial statements of a not-for-profit prepared under FASB 117, the term "fund balance" has been replaced with the term:

A) surplus/deficit
B) Net Income/Loss
C) Net Assets
D) Net Equity

Question 8

Government grants that require performance by the not-for-profit organization will be accounted for as:

A) Revenue-Unrestricted
B) Refundable deposits until earned, then Revenue-Unrestricted
C) Revenue-Temporarily Unrestricted
D) Endowments

Question 9

The local chapter of a CPA association, a not-for-profit organization, separate their expenses between program functions and support functions. Which of the following denote a proper classification of expenses?

A) I.
B) II.
C) III.
D) IV.

Question 10

What is the proper method of carrying investments by a voluntary health and welfare organization?

A) cost
B) lower of cost or market
C) either cost or market if applied consistently
D) market value measured at year end

Question 11

A donation was received by a voluntary health and welfare organization of materials to be used in providing services. How would these donated materials be recorded?

A) As inventory
B) As restricted contributions
C) As assets held for resale
D) As contributed services

Question 12

Public support for a voluntary health and welfare organization includes:

A) news articles about the organization.
B) banners and promotional materials.
C) legacies and bequests.
D) celebrity endorsements.

Question 13

Atlee makes a cash gift to a not-for-profit local ballet company which is designated by the donor to buy costumes for a new ballet staging. It should be accounted for with the following journal entry:

Question 14

Which of the following organizations would be classified as a voluntary health and welfare organization?

A) the local ballet company
B) the Sierra Foundation, an environmental organization
C) a private elementary school
D) a synagogue

Question 15

A voluntary welfare organization is permitted to use building facilities rent free. This should be recorded as:

A) a footnote in the financial statements disclosing the rent-free arrangement.
B) a contribution.
C) rent expense at the fair market value.
D) both b and c are correct.

Question 16

Depreciation Expense is recorded in which of the following funds for a voluntary health and welfare organization electing to use fund accounting?

A) Current Unrestricted Fund
B) Plant Fund
C) Depreciation is recorded in both the Current Unrestricted and Plant funds.
D) Depreciation is not normally recorded by health and welfare organizations.

Question 17

Currently, which of the following has jurisdiction over accounting and financial reporting standards for voluntary health and welfare organizations?

A) The Governmental Accounting Standards Board
B) The Financial Accounting Standards Board
C) American Institute of Certified Public Accountants
D) The Not-for-Profit Accounting Board

Question 18

Which of the following financial statements is not required when reporting for a voluntary health and welfare organization?

A) Statement of Financial Position
B) Statement of Support, Revenue, Expenses and Changes in Fund Balances
C) Statement of Functional Expenses
D) Statement of Cash Flows

Question 19

A contribution made in 1999 to a voluntary health and welfare organization, which is restricted to usage to celebrate the millennium in the year 2000, is recorded as a credit to:

A) Contributions.
B) Revenue--unrestricted.
C) Revenue--temporarily restricted.
D) Revenue--permanently restricted.

Question 20

Which of the following is NOT a required external financial statement for a not-for-profit organization?

A) Statement of Financial Position
B) Statement of Functional Expenses
C) Statement of Activities
D) Management Discussion and Analysis

Question 21

Contribution of a work of art to a museum for public exhibit would

A) be recognized as a contribution at fair market value.
B) be recognized as operating revenue based upon admission fees.
C) be recognized as an asset subject to depreciation.
D) not be recognized as a contribution.

Question 22

The American Heart Association is having its annual Heart Ball. The ball is an on-going event and a major annual event for the association. Any direct costs of the ball are considered:

A) Cost of Special Events
B) Operating Expenses
C) Fund Raising Expenses
D) None of the above

Question 23

Assume that investments in an Endowment Fund are being carried at market value. The annual net appreciation of investments should:

A) not be recognized until realized.
B) be recorded as investment revenue.
C) be recorded as deferred revenue.
D) be credited directly to the Endowment Fund Balance.

Question 24

A CPA donates her services to prepare the annual financial report for a voluntary health and welfare organization. The services should be recorded as:

A) revenues-unrestricted.
B) accounting expenses.
C) a footnote disclosure in the financial report.
D) both a and b are correct.

Question 25

By placing a check mark in the appropriate column, indicate all of the funds of a voluntary health and welfare organization in which the following events might correctly be recorded. (Hint: An event may require entries in more than one fund.)

Question 26

Gains and losses, in other than the first year, from pooled investments are distributed to participating funds based on:

A) cost of contributed assets at the time of original pooling.
B) market value of contributed assets at the time of original pooling.
C) market value at the time of any additions or withdrawals.
D) market value at the previous valuation date.

Question 27

The following events are for the Public Health Agency, a voluntary health and welfare organization that conducts two programs: public health research and public health education:
Required:
Prepare journal entries for the year ended December 31, 20X7:

Question 28

Rapitown Arts Council provides financial support to a number of independent fine-art projects in the city. Data concerning several events follow:
a.
During 20X5, a fund-raising drive yielded $100,000 in cash and $25,000 in pledges.
b.
Based on past experience, 10% of the pledges are estimated to be uncollectible.
c.
A July 4 art fair yielded $20,000 in gross revenue. The proceeds of the fair are considered unrestricted. The cost of the program was $8,000, paid in cash.
d.
$22,000 of the pledges mentioned in part (a) are collected during the year.
e.
The following expenses were paid:
Required:
Make the necessary entries to record the transactions.

Question 29

By placing a check mark in the appropriate column, indicate in which fund of a voluntary health and welfare organization the following events normally would be recorded. (Note: An event may require entries in more than one fund.)

Question 30

Which of the following would appear in the Custodian (Agency) Funds of a voluntary health and welfare organization?

Question 31

Voluntary health and welfare organizations prepare a Statement of Activities which displays program and supporting services costs. Program expenses for a cancer society would include:

A) fund-raising costs
B) chief executive officer salary
C) program costs of cancer research
D) Brochures for prospective members

Question 32

The following events are for South City Shelter, a voluntary health and welfare organization that provides emergency shelter and health care for the homeless, as well as educational programs:
a.
A fund-raising program for a portable medical clinic yielded cash contributions of $50,000 and pledges of $100,000. In the past, 5% of pledges have been shown to be uncollectible.
b.
A note for $100,000 was signed to finance the remaining cost of the clinic.
c.
The mobile clinic and support materials were purchased for $240,000.
d.
A note payment of $5,000 and $1,500 in interest was paid for the note in part (c).
Required:
Record the necessary journal entries.

Question 33

Donated services are recognized as a contribution if:

A) they create or enhance nonfinancial assets.
B) they require specialized skills and the individuals performing the donated service possess those skills.
C) the organization would otherwise purchase the service.
D) All of the above are correct.

Question 34

Describe the circumstances that must be true in order for donated, personal services to be recorded as revenue (contributions) in a voluntary health and welfare organization.

Question 35

What are the two major categories of resources obtained by voluntary health and welfare organizations, and how do they differ?

Question 36

Describe the basic accounting for private not-for-profit groups promoted by FASB Statement No. 117 including a brief description of the three net asset classes.
b. Indicate in which of the net asset classes the following transactions belong:
1. Donor makes gift to not-for profit which must be invested and maintained in perpetuity
2. Income Earned on donation noted in item #1 is restricted to certain program expenditures
3. Gains/Losses, both realized and unrealized, on donation noted in item #1. Not stipulated in donor agreement or by the law
4. Expenses paid out for programs stipulated in donor agreement relating to donation made in item #1.

Question 37

South City Shelter is a voluntary health and welfare organization that provides emergency shelter and health care for the homeless, as well as educational programs. South City Shelter incurred the following transactions:
a.
A computer with a book value of $500 (original cost, $2,800) was sold for $650.
b.
Kitchen equipment with a book value of $1,100 (original cost, $3,500) was damaged in a fire and taken to the dump.
c.
Total depreciation for the year was $60,000.
d.
To close the depreciation expense, it was determined that 70% should be allocated to the Shelter Program, 15% to the Education Program, and 15% to the Health Care Program.
Required:
Make the necessary journal entries to reflect the events.

Question 38

How do you differentiate between a voluntary health and welfare organization and another not-for-profit organization?

Question 39

The following events affected the Rapitown Arts Council:
a.
Contributions of $20,000, restricted for use in the children's art program, are received.
b.
Stocks with a book value of $10,000 and a fair market value of $11,000 were donated. The proceeds from the sale of the stocks are to be used by the local drama group.
c.
A famous author lectured to high school students in the children's art program. The cost was $3,000 and was paid by the contributions from part (a).
d.
The stock donated in part (b) is sold for $11,500.
Required:
Make the necessary journal entries.

Question 40

Which of the following expenses would be considered a program service expense for the local cancer society?

A) salary of a home care nurse
B) salary of the local director
C) rent for the local office
D) printing costs for a fund-raising brochure

Question 41

The Elder Citizens Agency is a voluntary health and welfare organization. The following events occur:
a.
This year's fund drive resulted in unrestricted pledges totaling $130,000. Pledges of $25,000 were received for a special hot meal program.
b.
Cash collected from pledges: unrestricted, $100,000; restricted, $18,000.
c.
A philanthropist, who is an attorney, contributed a painting valued at $4,000, which is to be auctioned off at a Thanksgiving supper organized to raise funds for a legal assistance program for the elderly. The event was an unexpected success. The painting was sold for $7,800. Additional gross cash revenues were $4,900. Direct costs paid were $1,700.
d.
The agency received $11,000 from the local division of United Way for general support.
e.
Salaries amounted to $70,000, payroll taxes were $6,000, and other employee benefits amounted to $10,000. Of these items, $5,000 is unpaid.
f. Arrangements have been made to have a local catering firm bring in a hot lunch. Senior citizens are charged $0.75 per meal. To date, payments to the catering service are $2,300. Cash collections from the meal program service totaled $900.

g. It is estimated that 10% of the remaining unrestricted pledges and 5% of the remaining restricted pledges will prove uncollectible.

h. At the end of the previous year, $10,000 of the balance of the Unrestricted Net Assets had been designated for a special program for handicapped elderly persons. The program was to be conducted during the current year if sufficient support could be generated. The idea was abandoned this year for lack of interest. The governing board authorizes the reclassification of the amount as undesignated.

i. The Elder Citizens Agency had budgeted $500 per month to rent space to conduct its general activities. A generous citizen permits the agency to occupy equivalent space at a nominal fee of $100 per year. The annual fee is paid, and the appropriate expense for the year is recorded.
Required:
Prepare journal entries to record the events.

Question 42

In the year 2005, a group of merchants in the community of Gunning organized a merchant group, The Gunning Group, in an effort to work together to increase business to Gunning area merchants. Each of the 100 members pays dues of $200 per year for operations and fund raising. All dues were collected in 2005. Other group activities for 2005 were as follows:
Make the necessary entries to account for the above listed transactions.

Question 43

Senior Wellness Center is a voluntary health and welfare organization devoted to health education for the elderly. It has investments in its Restricted Fund, its Plant Fund, and its Endowment Fund. On January 2, the organization decided to pool the investments of the three funds, and thereafter to maintain all investment account balances at market value.
Required:
Prepare a schedule of equities in pooled investments for the three funds at the end of the first two quarters.

Question 44

The Good Health Agency is a voluntary health and welfare organization that conducts two programs: public health research and public health education.
Required:
Prepare journal entries for these events. Charge the respective services for their share of expenses.

Question 45

The Community Drug Clinic is a voluntary health and welfare organization that conducts two programs: drug abuse research and drug abuse education. An inexperienced accountant recorded the following entries:
Required:
Omitting explanations, prepare the correct entries, including the entry to assign expenses to programs and services. Assume that the incorrect entries of the previous accountant are reversed prior to your entries.